Can Facebook Find a Way to Monetize Instagram Video?

Facebook on June 20 revealed that it has built out its already popular Instagram mobile photo-sharing application by adding the option of creating video clips ranging from three to 15 seconds long.

These can be strung together to make longer videos, should the user choose to do so. Instagrammers—and there are about 130 million of them—also can choose from among 13 new filters to customize the look and feel of the video. The new app also includes video stabilization to smooth out shaky takes.

Although neither Facebook CEO Mark Zuckerberg nor Instagram chief Kevin Systrom (pictured) would state it publicly at the launch event at Facebook headquarters in Menlo Park, Calif., the new video addition comes as a direct response to the growing popularity of Vine, Twitter's video-sharing app. Vine allows a maximum of six seconds of video.

“This is driven by consumer demand, not by business need. I don't think we designed it with any advertising in mind," Systrom told reporters during the news conference.

Pressure to Perform

But Facebook is under a lot of pressure from stockholders to monetize everything it can, so just because it wasn't designed with advertising in mind doesn't mean that ads won't eventually be included somewhere.

Nobody denies that Instagram has made a big impression on its users—which generally are in the under-35 demographic—in less than three years in the market.

Systrom offered some metrics during his time on stage. "Instagram has stored 16 billion photos in about two-and-a-half years," he said. "That's a lot of pictures of coffee. We get about 1 billion likes every day."

Why the 15-Second Window?

Systrom said Instagram chose the 15 second-limit because after a lot of testing "15 seconds was that Goldilocks moment. It feels just right," he said.

Eden Zoller, principal consumer analyst at Ovum, said in a media advisory that it made sense for Facebook to launch video features in Instagram.

"Since acquiring Instagram in 2012, Facebook has given the distinct impression that it does not know what to do with it, having made little progress with any significant enhancements to the service," Zoller said. "Given the importance of mobile and video for Facebook, the prospect of video features in Instagram should come as no surprise. And given the popularity of Twitter's Vine service, it is perhaps more surprising that Facebook has not introduced video for Instagram sooner."

There is no doubt Twitter will move quickly to up the ante on Vine, and this could undercut Facebook's efforts with video on Instagram, Zoller wrote.

"Facebook will need to come out with something compelling, particularly in light of recent lackluster new initiatives such as Facebook Home, and also ensure that the video features on Instagram are in keeping with the ease of use and simplicity that have made the core photo-sharing service so popular," Zoller wrote.

"But new features aside, Facebook still needs to come up with a strategy for how to monetize Instagram, which so far it has failed to do."

New Service Had a Busy First Day

Video on Instagram had a busy first day on June 20, and staff members announced some first-day video stats on its blog. For example:

--One year's worth of video was uploaded in the first 8 hours; i.e., if you sat down to watch them all back to back, it would literally take you one year to watch all of the video;

--there were 5 million uploads in the first 24 hours; and

--the company also saw a peak of 40 hours of video uploaded per minute when the Miami Heat won the NBA championship over the San Antonio Spurs that evening.